If you’ve been watching the falls in the Darwin property market in recent years, you’d be forgiven for wondering whether the Northern Territory’s capital represents a good investment in 2019. But market analysts say there’s significant opportunity in Darwin right now for savvy property investors. Moreover, a broader market turnaround could happen very soon.

Before we take a look at the data, it’s important to understand what factors have the biggest impact on property prices in Darwin. First, the city has a relatively small population and therefore much less housing stock than, say, the east-coast capital cities. This means only a small number of properties need to change hands at a profit or a loss to have a noticeable effect on median prices.

Secondly, the Northern Territory’s economy has long relied on the resources sector, which experiences substantial ebbs and flows. This means Darwin’s population expands and contracts dramatically depending on how much work is available in the industry.

“The resources sector has been in a decline cycle in recent years, which has meant a lot less demand for housing but plenty of supply, thus downward pressure on prices,” explains Quentin Kilian, chief executive of the Real Estate Institute of Northern Territory.

“We estimate that at the current vacancy rate of 8.6 per cent, there are about 2000 properties available in the market place. If you can picture population growth of 3000 to 5000 people over a year – and that is very achievable – then you can see that we would move from an oversupplied market to an undersupplied one very quickly.”

This means the falls in median prices that Darwin saw in 2018 (a dip of 12 per cent for houses and 11.4 per cent for units, according to Domain) could potentially be reversed if there is jobs growth.

And there’s good reason to believe growth will occur in 2019. “The multibillion-dollar investment in defence infrastructure has begun and will ramp up over 2019,” Kilian says. “Mining is making a major comeback, with over a dozen sites in the Territory producing resources the world wants, and at higher market prices; and onshore gas exploration is gaining pace.”

For the time being, prices are still falling. But this has benefited some recent buyers in Darwin – specifically, those who are renting out their houses or units. “It’s simple – when prices fall, yields go up,” says Domain economist Trent Wiltshire.

Indeed, at 5.86 per cent, rental yields in Darwin are currently the highest of any state capital in Australia, according to CoreLogic data. Darwin is also one of only two state capitals to record an increase in rental yields in 2018. Compared with Sydney’s current rental yield of 3.12 per cent, Darwin looks very attractive.

“The lower prices and high rental yields offer a fabulous opportunity,” Kilian says. “And it’s worth noting that rental yields in the Territory have been some of the strongest in Australia for a decade now.”

Kilian points out that, although the population of Darwin tends to fluctuate over the medium term, there is a reliable stream of workers arriving on short-term contracts who keep the rental market ticking over.

In the long term, Kilian reckons Darwin is set to blossom. “The Territory has the opportunity to rival – albeit on a lesser scale – the likes of Dubai, Qatar, Abu Dhabi and Brunei,” he says. “We have the oil and gas reserves that can make us the primary Asia-Pacific location for gas exploration and delivery for the foreseeable future.”